A difficult week for equities.

A rough week for equity investors as the developed markets of Europe, the US and the UK all fell almost 3%. Surprisingly, despite the sharp falls, the Vix, as a guide to underlying sentiment rose but not alarmingly so. The Vix closed on Friday just below 14; a rise on the week however it remains at a level that may suggest underlying investor sentiment is not in panic mode.

A combination of the weakness of commodity prices and a mixed bag of company results appearing to take the blame for the falls. One stock that did do well post earnings was Amazon. It share price rose sharply as the company announced a profit of just less than 100 million dollars in the second quarter, on a turnover in the second quarter of just over twenty three billion dollars. The stock, according to Stockopedia, currently trades just under 300x times these years’ earnings. Amazon does have $10bn of cash on its balance sheet. As yet Amazon has not paid out dividends, that day may be coming closer.

Another reason equities may have taken a knock this week was the flattening of the US yield curve, as this can suggest a worsening of sentiment to the economic outlook. This is a term used to describe the narrowing of the difference between the yields on the longer dated government bonds and the shorter dated maturities. Yields on the two-year maturity rose to close the week at 0.71%, the yield on the 10-year bond fell to 2.26%.

On Friday there was a release of a raft of economic data, most of which came approximately in line with expectations. Capital markets continue to weigh up the possibility of a rate rise against the mixed economic outlook. The Federal Reserve will once again debate this conundrum on Wednesday at its monthly meeting, when they release the latest interest rate decision.

Looking to the week ahead Monday, Thursday and Friday for Europe will be important days. On Monday we see the latest euro area loan growth data, Thursday economic and consumer sentiment for July then on Friday inflation and employment reports. For the US the focus is likely to be on the housing data on Tuesday and Wednesday. On Thursday we get the second quarter GDP estimates as well as jobless reports. In the UK Tuesday’s 2nd quarter GDP estimates is most likely to make the headlines.

Aside from macro data the focus will be on earnings, this is another busy week for earnings reports. The focus may well be on BP on Tuesday, Barclays and GSK on Wednesday and BT on Thursday. The holiday season is now in full flow, sell in May and go away this year so far seems to be working.